Pharmaceuticals: Why ad spending’s ailing

A number of ad categories have increased spending over the past few years following deep declines during the height of the recession.

Pharmaceuticals is not one of them.

Even as positive economic news builds, including a decrease in the unemployment rate, an increase in home building starts and a surge in the stock market, drug companies have reigned in their ad budgets.

Unlike many other categories, such as automotive and retail, pharmaceutical spending is tied not so much to the economy as to the state of the industry itself, and right now the mood is one of extreme caution.

Last year GlaxoKlineSmith reached a $3 billion settlement with the Justice Department over the marketing and development of its drugs. The government accused the British company of, among other things, advertising its drugs to treat ailments they were not approved for.

“Overall the business in the past several years has taken a more cautious approach to marketing in response to fears about regulation,” notes Jon Swallen, chief research officer at Kantar Media North America.

No one wants to be the next GlaxoKlineSmith, and in response many companies have pulled back on their advertising.

Last year spending in the category declined 3.8 percent, according to data crunched by Kantar and Nomura, from $7.6 billion to $7.31 billion.

It was the third-biggest decline for any top-20 ad category, behind only office supplies (down 10.3 percent) and media and entertainment (down 4.2 percent).

No individual pharmaceutical advertiser finished among the top 10 for 2012, according to Kantar. Pfizer was among the top seven until 2011.

Pharmaceutical advertising has dropped sharply in magazines as well as spot television, where spending plunged 30 percent last year, according to the TVB.

The other issue holding back spending is that there hasn’t been a major new drug introduction in some years. With no major new drugs to promote, pharmaceutical companies have little reason to increase spending.

In the past, rollouts of drugs such as Viagra, Lipitor and Zoloft have triggered a huge amount of ad spending to familiarize the public with the purpose and benefits of the new medications.

“Part of the reason is there have not been any big blockbuster marketing launches for newly approved drugs,” Swallen says.

“That was traditionally the catalyst during the last half of the past decade, 2005 to 2010. The category was propelled by marketing introductions.”

And with no major introductions on the horizon, the pharmaceutical ad chill could last for years to come.